Receivable Acquisition & Management Corp Files Quarterly Report

Debt purchaser Receivable Acquisition & Management Corp. filed its quarterly earnings report with the SEC on Friday.  The company gave an overview of its recent business activities and its current market position in the filing.

The Company is now engaged in purchase and recovery of performing, sub-performing and non-performing consumer receivables. These receivables are acquired at deep discounts and outsourced for collections on a contingency basis. The Company also manages Ramco Income Fund, Ltd, a Bermuda domiciled mutual fund with $2.1 million in invested capital. The Company continues to seek additional capital to invest into additional portfolios. The Company recently entered into a Heads of Terms agreement with a bank in United Kingdom which calls for a minimum commitment of ?25,000,000 into Ramco Income Fund. There is no assurance that this commitment will result in actual investment in the Fund. Concurrently, the Company has entered into an agreement with a Germany based bank and loan servicer to assist in acquiring and serving non-performing and sub-performing loans in Germany. The Company also manages two Special Purpose Vehicles funded with non-recourse notes that have invested in two different portfolios with approximately $3.35 million under management. The Company does hold any equity in these vehicles only receives servicing income and may receive some of the residual cash flow after the investors have recouped their investment and agreed upon return.

The Company continues to execute its long term strategy. However, due continued prevalence of high portfolio prices, it has not been able to scale up investments in consumer charge-offs. The Company is currently focusing on raising capital to invest in non-performing and sub-performing loans in Germany. The company has a standby lender with a commitment to lend up to $500,000.

The Company generated $91,193 in revenue during the quarter ended March 31, 2007 versus $170,749 for quarter ended March 31, 2006. Total revenue included $47,962 finance income, $24,897 servicing income and $18,334 from gain on sale of a portfolio. In the quarter ended March 31, 2007 finance income decreased by approximately 51% or $50,475 compared to the quarter ended March 31, 2006 and servicing income decreased by approximately 53 % or $28,081 when compared to quarter ended March 31, 2006. The company recognized approximately 20 % of net cash collections as revenue during the quarter ended March 31, 2007 versus 38% during the quarter ended March 31, 2006. This is largely because the Company is carrying only one portfolio on the interest method basis. The Company collected $236,339 during the quarter but recognized only $47,962 as revenues. The percentage of cash collected recognized as revenue remains well below the industry average of 70%. Finance income is expected to decline due to redemptions from the managed fund, Ramco Income Fund Ltd. During the quarter, the company acquired two portfolios that are being carried on a cost recovery basis. The Company may apply the interest rate method to other portfolios acquired during the current quarter once there is confidence in the expected recovery curve.

Total operating expenses increased by 5% to $188,417 for the three months ended March 31, 2007 versus $178,743 for the quarter ended March 31, 2006 and sequentially decreased slightly from the first quarter ended December 31, 2006.

During the three months ended March 31, 2007, the Company acquired defaulted consumer receivables portfolios with aggregate face value amount of $4,632,119 at a cost of $324,248. As a part of its strategy, the Company does not do any in-house collection, but outsources collection to carefully selected specialist debt collection agencies. The Company is currently working with four collection agencies on a contingency basis. The contingency fees averaged 25% during the quarter.

When the Company acquires a portfolio of defaulted receivables, it estimates the expected recovery of the portfolio. A 36 to 60 month projection of cash collections is created for each portfolio. Only after the portfolio has established probable and estimable performance in excess of projections will the accretable yield be increased and recognized as revenue. If actual cash collections are less than the original forecast, the Company will take an impairment charge. Collection activities commence within 30 days of purchase, which allows for adequate time to scrub the portfolio for deceased, settled, incarcerated and bankruptcy filed accounts. For modeling and revenue recognition purposes, the company uses 15 calendar days.

The Company outsources all its recovery activities to carefully selected debt collection agencies and network of collection attorneys with specific collection expertise. The company is currently using four collection agencies and several law firms in the U.S. and U.K. The average contingent collections fee is 27% which rises during the later years of recovery.